Solved: Re: Why is $3000 in capital losses not being deduc...
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Jack2572
New Member

Why is $3000 in capital losses not being deducted from my federal tax of ~$1000?

I owe roughly ~$1,000 in federal income tax. When I enter my capital losses of $3,000+ in the TurboTax Free File Program, only a very small percentage is deducted from the total tax owed. Can anyone explain this? I was under the impression that I should not have to pay any taxes if my short term capital losses were greater than my federal income tax due. Thanks!

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Accepted Solutions
tagteam
Level 15

Why is $3000 in capital losses not being deducted from my federal tax of ~$1000?

Capital losses and capital gains are netted.

 

If you have a net capital loss, then the amount of the loss you can deduct from other income is limited to $3,000 per year ($1,500 if married and filing a separate return). 

 

See https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

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2 Replies
Country Apple
Level 4

Why is $3000 in capital losses not being deducted from my federal tax of ~$1000?

Capital losses reduce your taxable income, thereby reducing your tax.  Capital losses are not tax credits and do not lower your taxes dollar for dollar.  A $3,000 capital loss would translate to a small amount of tax.

tagteam
Level 15

Why is $3000 in capital losses not being deducted from my federal tax of ~$1000?

Capital losses and capital gains are netted.

 

If you have a net capital loss, then the amount of the loss you can deduct from other income is limited to $3,000 per year ($1,500 if married and filing a separate return). 

 

See https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

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